VZCZCXRO1035
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGP #0722/01 2120932
ZNR UUUUU ZZH
R 310932Z JUL 09
FM AMEMBASSY SINGAPORE
TO RUEHC/SECSTATE WASHDC 7011
INFO RUCPDOC/USDOC WASHDC
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 02 SINGAPORE 000722 
 
STATE PASS USTR 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ELAB EINV SN
 
SUBJECT:  SINGAPORE UNEMPLOYMENT RATE STEADY AS ECONOMY BEGINS 
RECOVERY 
 
REF: A) SINGAPORE 112; B) SINGAPORE 671; C) SINGAPORE 80 
 
¶1.  (U) Summary:  Singapore's overall unemployment rate stayed 
steady at 3.3 percent during the second quarter, although industry 
still reported 12,400 net job losses, mostly in manufacturing. 
Unemployment during the economic slowdown has been lower than in 
previous recessions, and much better than had been feared earlier in 
the year.  Labor market analysts give credit for the lower than 
expected job losses to Singapore's flexible wage structure and 
company policies to shrink wages and shorten work weeks rather than 
lay off surplus workers.  Government programs to subsidize worker 
salaries and training have kept tens of thousands of workers on 
payrolls and helped keep company bankruptcies to a minimum.  Surveys 
of business sentiment indicate improved hiring prospects in the 
final half of the year, but unemployment rates will likely stay 
elevated as companies bring back temporarily surplus workers first 
rather than hire new entrants.  End Summary. 
 
Unemployment Rate Steady, But Still Job Losses 
--------------------------------------------- - 
 
¶2.  (U) On July 31, Singapore's Ministry of Manpower released 
preliminary unemployment figures for the second quarter of 2009 
showing no change in the overall unemployment rate of 3.3 percent 
seen during the first quarter, seasonally adjusted.  The resident 
unemployment rate, which captures only Singaporeans and permanent 
residents, actually declined from 4.8 percent to 4.6 percent.  The 
overall rate was under consensus estimates by local economic 
analysts of 3.7 percent.  However, non-seasonally adjusted figures 
showed the unemployment rate climbing from 3.0 percent to 4.2 
percent, and the resident unemployment rate hitting 6.0 percent. 
The Ministry of Manpower said the higher non-seasonally adjusted 
rate partly reflected the entrance of new graduates into the labor 
market.  Industry reported 12,400 job losses over the second 
quarter, primarily in manufacturing.   Construction and services had 
small net gains.  An estimated 116,600 Singaporean residents are 
unemployed. 
 
¶3.  (U) Despite the increase in unemployment, economic analysts say 
current job losses are less severe than in past recessions and lower 
than had been feared at the height of the recession at the beginning 
of the year.  A Credit Suisse report in January (ref A) had 
predicted job losses of over 200,000 during 2009 among foreign 
workers alone.  Net job losses in the first quarter turned out to be 
only 0.2% of the labor force, a surprisingly low number given the 
real GDP drop of eight percent in the last quarter of 2008 and first 
quarter of 2009.  However, employment tends to lag GDP growth and 
although there are ample signs that the Singapore economy has 
bottomed out and a recovery has begun (ref B), another wave of job 
losses is possible and unemployment is expected to peak during the 
third or fourth quarter of 2009. 
 
Keeping Workers On the Payroll 
------------------------------ 
 
¶4.  (SBU) Economists credit Singapore's flexible wage structure, 
strong corporate balance sheets, and government jobs programs for 
the resiliency of the labor market.  Companies have been following 
National Wage Council guidelines to save costs by reducing wages, 
eliminating bonuses and cutting work weeks rather than retrenching 
workers.  Credit Suisse estimated that real wages fell 5.8 percent 
in the first quarter, the largest drop since 1998.  In some cases, 
multinationals are substituting high cost foreign labor with lower 
cost foreign labor, and moving expatriate workers to local packages. 
 Strong balance sheets have meant fewer bankruptcies during this 
recession, allowing most companies to ride out the recession and 
keep staff on board.  Song Seng Wun, regional economist for CIMB, 
told Econoff that although there were high numbers of layoffs during 
the recession there was still substantial hiring, particularly in 
construction and in the public sector, and many retrenched workers 
were able to find new employment relatively quickly.  Also, many 
foreign workers have returned home rather than find new employment, 
and universities are reporting higher than normal application rates 
for the upcoming school year, reducing the overall labor pool. 
 
¶5.  (SBU) Government programs to subsidize worker salaries and 
training have also received credit for saving tens of thousands of 
jobs.  The Jobs Credit Scheme instituted as part of a stimulus 
budget package in January (ref C) has been the most important, 
offering a 12 percent rebate to employers on the first S$2500 
(US$1750) of wages for Singaporean or permanent resident workers.  A 
Citibank study estimated the scheme reduced employers' wage bills by 
an average of six percent per worker across all industries.  For 
industries with a high labor component and relatively low wages this 
program has been a boon.  Over S$1.8 billion (US$1.25 billion) has 
 
SINGAPORE 00000722  002 OF 002 
 
 
been distributed to companies since the program began.  Companies 
have also sent 124,500 workers for subsidized training programs. 
The SPUR program covers up to 90 percent of training costs and 
provides a stipend to workers while in training, allowing companies 
to upgrade the skills of temporarily surplus labor without forcing 
layoffs. 
 
Hiring Outlook Looking Up 
------------------------- 
 
¶6.  (U) Employment surveys suggest that the labor market has 
bottomed out and hiring prospects are improving.  A survey by 
Manpower, Inc. of 697 employers in Singapore showed that 74 percent 
had no plans to change total employment during the third quarter, 
but 12 percent planned to hire versus seven percent planning to 
decrease total employment.  The results were far superior to surveys 
for the previous two quarters that predicted substantial layoffs.  A 
May poll by recruitment firm Hudson was even more optimistic, with 
26 percent of executives polled projecting higher recruitment in the 
third quarter, with 60 percent planning to hold steady. 
 
¶7.  (U) Respondents to the Hudson poll from the healthcare and life 
sciences sector had the highest hiring expectations with 38 percent 
planning to grow headcount.  The financial sector had the biggest 
jump in hiring intentions, with 32 percent planning to hire compared 
to only 19 percent in the second quarter survey.  Employment 
prospects are still dim in manufacturing, which showed a net 
employment outlook of negative 29 percent in the Manpower survey. 
Despite the still high number of unemployed, Marina Bay Sands 
reported July 30 that it was having difficulty filling 4500 gaming 
positions at its casino scheduled to open in early 2010. 
 
¶8.  (U) Although analysts believe the resident unemployment rate 
will not peak too far beyond five percent, the measures taken to 
minimize headcount reductions will mean lower unemployment rates 
remain a ways off.  As business improves, companies will first 
re-establish regular work weeks, end temporary layoffs and bring 
workers back from training rather than hire new workers from the 
labor pool. 
 
SHIELDS